The High Court of Jammu & Kashmir and Ladakh has declined to quash the chargesheets filed in the alleged ₹227 crore J&K Bank loan fraud case involving Aman Hospitality Pvt. Ltd. (AHPL), holding that the material collected during the investigation discloses a prima facie case warranting a full criminal trial.
Justice Sanjay Dhar, while dismissing a batch of petitions challenging the chargesheets, observed that the High Court cannot undertake a detailed appreciation of evidence while exercising its inherent jurisdiction under Section 482 of the Code of Criminal Procedure.
Loans Sanctioned for Five-Star Hotel Project
The case relates to loans sanctioned by J&K Bank's Ansal Plaza Branch in New Delhi to Aman Hospitality Pvt. Ltd. for the construction of a five-star hotel project in Shahdara, Delhi.
According to investigators, the company obtained:
- Term loans totalling ₹227 crore
- A bank guarantee facility of ₹15 crore
The investigation states that the bank sanctioned:
- ₹100 crore term loan and ₹5 crore bank guarantee in August 2009
- ₹50 crore second term loan in October 2011
- ₹77 crore third term loan in January 2012
- ₹47.21 crore Funded Interest Term Loan (FITL) in December 2014
Investigation and Chargesheets
Following an investigation into the first disbursal of ₹35 crore from the initial loan, the Anti-Corruption Bureau (ACB) filed a chargesheet alleging offences including:
- Criminal conspiracy
- Criminal breach of trust
- Cheating
- Corruption-related offences
The chargesheet named:
- Raj Singh Gehlot
- Mohan Singh
- Sheela Gehlot
- Madhu Bakshi
- Aman Hospitality Pvt. Ltd.
- Ambiance Pvt. Ltd.
- NGR Consultants Pvt. Ltd.
- Raj Commercial and Agencies
- Former officials of J&K Bank
In June 2021, the Jammu and Kashmir Government transferred the investigation to the Central Bureau of Investigation (CBI).
The CBI subsequently registered a fresh case, conducted further investigation and filed a supplementary chargesheet before the Special Court.
Petitioners Challenged Criminal Proceedings
Before the High Court, the petitioners argued that:
- No criminal conspiracy existed.
- Loan funds had not been diverted.
- Payments merely reimbursed expenses already incurred by the turnkey contractor.
- The hotel project had been successfully completed.
- Forensic audits had not established any fraud.
The petitioners contended that the matter did not warrant criminal prosecution.
High Court Finds Allegations Require Trial
Rejecting the plea at the preliminary stage, the High Court observed that the loan sanction conditions specifically required the funds to be utilised exclusively for the approved hotel project and prohibited their use for any other purpose.
The court noted that the investigation indicated loan proceeds were allegedly transferred from the designated borrower account to several entities said to be controlled by the principal accused.
It further observed that although the hotel project was ultimately completed and substantial investments had already been made before obtaining the loans, those facts alone did not negate the possibility of criminal conduct.
Civil Dispute or Criminal Offence?
The High Court clarified that if the dispute had merely concerned repayment issues or a one-time settlement without dishonest intention at the time the loans were obtained, it could have been treated as a civil matter.
However, based on the investigation records placed before it, the court observed that there was prima facie material suggesting:
- Diversion of loan proceeds
- Misutilisation of sanctioned funds
- Alleged siphoning of money for purposes other than those approved by the bank
The court concluded that these allegations warranted examination during trial rather than dismissal at the threshold.
Trial to Continue
Holding that sufficient material exists for criminal prosecution, the High Court dismissed all petitions seeking quashing of the chargesheets.
The criminal proceedings will now continue before the competent trial court, where the prosecution and defence will have the opportunity to present evidence in accordance with law.
Legal Position
The High Court's order permits the criminal trial to proceed but does not determine the guilt or innocence of any accused.
The allegations contained in the chargesheets remain subject to judicial determination during trial. Every accused is entitled to the presumption of innocence until proven guilty by a competent court.
Shunyatax Global Insight
Large-value banking fraud investigations frequently involve scrutiny of loan sanction procedures, end-use monitoring, fund flow analysis and compliance with lending conditions. Courts exercising inherent jurisdiction generally refrain from evaluating disputed evidence at the preliminary stage where investigative material discloses a prima facie case, leaving such questions to be decided during a full trial. The judgment underscores the distinction between civil disputes arising from loan defaults and criminal allegations involving suspected diversion or misappropriation of sanctioned funds.
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